7/12/21: It’s that time of year again: Major League Baseball’s (MLB) All-Star break, a time when investors trade their quote screens for sunscreen, stash their calculators, grab their Kindles and leave their mobile phones charging on their bedside tables. The All-Star break is also a time when we at Cresset ask the eternal question: Can money buy a winning ball club? Without salary caps and league parity, Major League Baseball is the closest professional sport to a free market, where, in theory, you get what you pay for. Of course, in reality that’s rarely the case – and that’s why we like to write about it.
MLB took a few innovative steps this year to gin up interest in “America’s Pastime” and speed up what is perceived to be a slow-moving experience, particularly among young people. The expanded postseason we saw in 2020 is not returning in 2021, with the playoff roster shrinking from 16 teams back to 10. The universal designated hitter (DH) also is out for 2021 after debuting last year. That means the DH is in American League (AL) ballparks, while pitchers are back to hitting in National League (NL) venues. Probably the most dramatic rule changes made in 2020 designed to speed up play are back. First, doubleheaders feature two seven-inning games. Second, MLB’s extra-innings rule is back, which means that beginning in the tenth inning, a runner is placed on second base at the start of each half inning.
Gone are the days of the scoreless pitchers’ duel. Modern baseball needs hits and homers. Beginning last month, MLB enhanced its enforcement of the rules that prohibit applying foreign substances to baseballs; in other words, eliminating the sticky substances some pitchers used to impart extra spin on their pitches. Any pitcher who possesses or applies foreign substances in violation of the rules will be ejected from the game and automatically suspended. As a result, we can expect higher batting averages, higher slugging ratios and more home runs and RBIs in the second half of the season.
The 2021 All-Star Game remains scheduled for July 13. However, MLB announced on April 2 that it would relocate the game from Atlanta’s Truist Park. It will be held at Denver’s Coors Field for the first time since 1998. The MLB Draft is scheduled to be a part of the All-Star festivities for the first time.
AMERICAN LEAGUE
AL payrolls continued to fall between the 2019 season and this year. Collectively, the league has held its payroll below the $2 billion mark for three consecutive years, if you include the abbreviated 2020 season. Nine of the league’s 16 teams trimmed their payroll expenses, perhaps reflecting the pullback in the game’s popularity. The Cleveland Indians suffered the most belt tightening – slashing their payroll by $70 million, representing a 57% salary reduction – and now has the lowest team payroll in MLB. The team, nonetheless, is sporting a winning percentage this year. The Chicago White Sox added nearly $40 million to its payroll and appears to be getting a return on their investment. The Southsiders’. 590 winning percentage ranks them sixth in all of baseball.
Our regression model is upwardly sloping, suggesting that winning percentage and payrolls are positively linked. We estimate that each additional million spent in the American League is worth .8 additional wins for the entire season.
Winners:
Tampa Bay Rays
The Rays are a small-market team caught in a division with the Red Sox and the Yankees. Second place isn’t bad for a team that spends less than half the amount spent by either of its big-money rivals. While the Rays trail the league-leading Red Sox by 4.5 games, they have six more wins than the budget-busting NY Yankees. Tampa’s front office has historically maintained value orientation. Armed with a relatively modest $69 million payroll, the Rays have captured 9 more wins than Cresset’s Moneyball model would suggest. Tampa’s pitching is strong, and boasts the best-in-the-league 3.55 team ERA. Tyler Glasnow leads the pitching staff with a career-best 2.66 ERA. The Rays are currently ranked third at the plate in runs, behind the Astros and the Red Sox.
Oakland Athletics
The Oakland A’s are the original Moneyball team and they continually make our honor roll. This year, the penurious A’s captured a .570 winning percentage with eight more wins than their $85 million payroll would suggest. First baseman Matt Olson is a top-tier hitter with an impressive .932 on-base plus slugging percentage and 21 home runs. Olson’s performance on offense has earned him a place on the American League’s All-Star Team. The Athletics are pursuing a new ballpark but are having trouble filling their existing field. The A’s opened at full capacity earlier last week, only to subsequently see the smallest crowds of the season – including the smallest crowd in Oakland in 24 years. As with their former hometown team mates the Raiders, this could portend a move to Vegas.
Boston Red Sox
The Red Sox are a large-market team with a champagne budget. The Sox are spending $177 million this year, and sit atop the AL East with the league-leading winning percentage. The team has delivered seven more wins than Cresset’s Moneyball model suggests, giving them one of the top honors in the American League. Reliever Matt Barnes ranks second in the league with 19 saves. Barnes is having the best year of his career so far, posting a 2.68 ERA (over a full run better than his previous low) in 37.0 innings while striking out 62 — second best among closers in the AL. He will be representing the team at the All-Star game. The Red Sox also hold the second-best batting average in the league, behind the Jays.
Losers:
Baltimore Orioles
The Orioles are the worst-ranked American League team in Cresset’s Moneyball study. The team sports the worst winning percentage in the AL at .321. We estimate they’re about 12 wins behind what their $57 million payroll would suggest. Putting it another way, the Orioles spent $5 million more than the Cleveland Indians this year yet have 15 fewer wins as of this writing. Ugly. Baltimore’s starting pitchers have the worst team ERA in the league, 5.53. Adding injury to insult, their ace, John Means, has been sidelined with a strained left shoulder. The O’s might have to look outside their organization for needed help.
Minnesota Twins
The Twins find themselves in the cellar of the AL Central division, 14.5 games behind the Chicago White Sox. While that’s not a big surprise based on their historical performance, what is surprising is the team’s $127 million payroll – a $6 million increase over their 2019 roster. That level of spending suggests a middle-of-the-pack performance, based on our model. The Twins have 122 homeruns this year, second behind Toronto. They hold a top-tier team batting average as well. Injuries have plagued the Twins this year. Ace pitcher Michael Pineda was sidelined with an elbow injury last month. Twins’ slugger Max Kepler has been struggling at the plate, hitting just .160 in 50 at-bats against lefties this season. The Twins have the pieces, but they need to be assembled. That’s team manager’s Rocco Baldelli’s job.
Texas Rangers
The Texas Rangers have historically done well in Cresset’s Moneyball ranking, but this year is an exception. The Rangers are stuck at the bottom of the AL West, 18.5 games behind the Astros. Our model suggests the team should be sitting at 39 wins, not 33. Perhaps it shouldn’t be a surprise, since Texas slashed its payroll this year by $31 million. The Rangers have a pitching problem: the team has only one starting pitcher with an ERA below 3.00, Kyle Gibson, whose arm and 6-0 record have been the heavy artillery of the Ranger’s pitching arsenal. Gibson will likely be traded. The team has blown 16 leads so far this year. Despite that, its offense is okay. The team is batting at a collective .233 average; defending World Series champs the Dodgers, by comparison, are batting at .240. The Rangers’ star hit-making outfielder duo of Joey Gallo and rookie Adolis Garcia have been shouldering the bulk of the team’s offensive work this season. As of June 28, they were responsible for 41 per cent of the Rangers’ home runs, 20 per cent of all hits and 31 per cent of all RBIs, with a collective batting average of .248. This team needs more depth, but, alas, the Rangers will probably be sellers later this month.
NATIONAL LEAGUE
The relationship between winning percentage and payrolls is positive in the NL also, suggesting that dollars drive wins. According to our calculations, National League teams should expect 1.1 additional wins for each additional million spent on talent. The NL payroll rose nearly $3 million between 2019 and 2021, with the biggest spending on the West Coast. The San Diego Padres, hardly a major-market team, splurged this year by boosting their payroll by $73 million, representing a 70-plus per cent jump in pay. Their .581 winning percentage reflects their investment. The LA Dodgers, a big-spending, large-market team, boosted their payroll by more than $50 million.
The relationship between expenditures on talent and success on the field is high in the National League this year. The big-budget LA Dodgers have 53 wins through June while Pittsburgh, with the smallest league payroll, sits at 30 wins. The outliers are lauded and derided below.
Winners:
Milwaukee Brewers
The Milwaukee Brewers are perennial winners in Cresset’s Moneyball studies. The team’s 2021 performance is all about defense. The Brew Crew pitching staff sports among the lowest opposing batting averages of batters they face, at .213, and second only to the LA Dodgers. A lot of the credit goes to Freddy Peralta: in his fourth year with the Brewers, he has seven wins this season and at 0.90, has among the lowest WHIP (walks plus hits in innings pitched) stats in the league. The team’s defense is so strong they’re able to maintain a .600 winning percentage with a team batting average, .219, that flirts with the Mendoza Line. Shortstop Willy Adames has been a game-changer. Since joining the Brewers on May 22, Adames had helped Milwaukee to that impressive .600 record. Our model suggests the Brewer’s $93 million payroll would imply a .428 winning percentage at this point in the season. This team is clearly punching above its weight.
San Francisco Giants
At .639, the Giants have the highest winning percentage in baseball. All that with a $153 million payroll. Like the Brewers, the Giants have a strong pitching staff. Overall, they’re tied for second with the Padres for earned runs, at a scant 3.29. Giants’ pitcher Kevin Gausman sports a 1.74 ERA and has eight wins through June. Add DeSclafani’s 10 wins, and clearly San Francisco has a strong one-two punch on the mound. The Giants have a league-leading 126 home runs and a .242 team batting average, making it an offensive threat as well. The Giants’ offense, unfortunately, has had to rely on the long ball, since the club recently endured a 0-for-25 stretch with runners in scoring position. The team’s offensive-defensive balance bodes well for the rest of the season.
San Diego Padres
San Diego ramped up their payroll this year and attracted team talent. With a .581 winning percentage, the Padres have delivered about six more wins than our regression model would suggest. The Padres picked up Yu Darvish from the Cubs this year and the pitcher is thriving, with seven wins and a 2.65 ERA. The Padres have turned to a six-man rotation and have pulled up pitchers from Triple-A to make starts. They’ve resorted to the bullpen in more than a dozen games. Offensively, shortstop Fernando Tatis Jr. leads the team with a .300 batting average and league-leading 27 home runs. The Padres are putting their substantial payroll increase to good use.
Losers:
Arizona Diamondbacks
The D-Backs are snakebit. Arizona has only 23 wins through the beginning of July, and the lowest winning percentage in all of baseball. While they don’t have a burgeoning payroll, their $53 million tab means the Diamondbacks are about 14 wins behind what our model suggests. Pitching is definitely not their strength: 26 pitchers have taken the mound for the team this year and only one has an ERA under 3.00. In fact, 14 out of 26 pitchers have an ERA over 5.00. Arizona’s ERA is 5.25, the worst in the National League. Offense isn’t much better. Making matter worse, the Diamondbacks suffered 23 consecutive road losses earlier this season, breaking records that were originally set back in 1943. Ouch.
Philadelphia Phillies
The Phillies are a large-market team with small-market results. Their 39 wins are about 14 wins behind where their $183 million payroll suggests they should be about now. Bryce Harper, one of the reasons for the big payroll spending, is delivering a team-leading batting average at .282 with 15 home runs and 30 runs batted in. On the mound, Zach Wheeler has delivered at six wins with a 2.05 ERA so far this season. But defense in general is a big problem in Philadelphia. Rhys Hoskins is one of the worst-fielding first baseman in the league and Didi Gregorius is ineffective at shortstop. The team is unsurprisingly ranked 22nd in defensive efficiency.
Pittsburgh Pirates
The hapless Pittsburgh Pirates has the smallest payroll in the league and the worst winning percentage. Even still, at only 30 wins, the team trails our model prediction of 43 wins at this point of the season. Hitting is largely to blame. The team has the lowest number of runs in the NL. They also have the second-highest ERA in the league. Relief pitching is a bright spot and will likely come into play as the trade deadline nears. Chasen Shreve has been one of the most successful relievers in terms of run prevention for the Pirates this season, posting a 2.25 ERA that makes him a potential trade piece for the Pirates, who are clear sellers at the trade deadline.
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About Cresset
Cresset is an independent, award-winning multi-family office and private investment firm with more than $60 billion in assets under management (as of 11/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.
Cresset’s 2021 Moneyball Study
7/12/21: It’s that time of year again: Major League Baseball’s (MLB) All-Star break, a time when investors trade their quote screens for sunscreen, stash their calculators, grab their Kindles and leave their mobile phones charging on their bedside tables. The All-Star break is also a time when we at Cresset ask the eternal question: Can money buy a winning ball club? Without salary caps and league parity, Major League Baseball is the closest professional sport to a free market, where, in theory, you get what you pay for. Of course, in reality that’s rarely the case – and that’s why we like to write about it.
MLB took a few innovative steps this year to gin up interest in “America’s Pastime” and speed up what is perceived to be a slow-moving experience, particularly among young people. The expanded postseason we saw in 2020 is not returning in 2021, with the playoff roster shrinking from 16 teams back to 10. The universal designated hitter (DH) also is out for 2021 after debuting last year. That means the DH is in American League (AL) ballparks, while pitchers are back to hitting in National League (NL) venues. Probably the most dramatic rule changes made in 2020 designed to speed up play are back. First, doubleheaders feature two seven-inning games. Second, MLB’s extra-innings rule is back, which means that beginning in the tenth inning, a runner is placed on second base at the start of each half inning.
Gone are the days of the scoreless pitchers’ duel. Modern baseball needs hits and homers. Beginning last month, MLB enhanced its enforcement of the rules that prohibit applying foreign substances to baseballs; in other words, eliminating the sticky substances some pitchers used to impart extra spin on their pitches. Any pitcher who possesses or applies foreign substances in violation of the rules will be ejected from the game and automatically suspended. As a result, we can expect higher batting averages, higher slugging ratios and more home runs and RBIs in the second half of the season.
The 2021 All-Star Game remains scheduled for July 13. However, MLB announced on April 2 that it would relocate the game from Atlanta’s Truist Park. It will be held at Denver’s Coors Field for the first time since 1998. The MLB Draft is scheduled to be a part of the All-Star festivities for the first time.
AMERICAN LEAGUE
AL payrolls continued to fall between the 2019 season and this year. Collectively, the league has held its payroll below the $2 billion mark for three consecutive years, if you include the abbreviated 2020 season. Nine of the league’s 16 teams trimmed their payroll expenses, perhaps reflecting the pullback in the game’s popularity. The Cleveland Indians suffered the most belt tightening – slashing their payroll by $70 million, representing a 57% salary reduction – and now has the lowest team payroll in MLB. The team, nonetheless, is sporting a winning percentage this year. The Chicago White Sox added nearly $40 million to its payroll and appears to be getting a return on their investment. The Southsiders’. 590 winning percentage ranks them sixth in all of baseball.
Our regression model is upwardly sloping, suggesting that winning percentage and payrolls are positively linked. We estimate that each additional million spent in the American League is worth .8 additional wins for the entire season.
Winners:
The Rays are a small-market team caught in a division with the Red Sox and the Yankees. Second place isn’t bad for a team that spends less than half the amount spent by either of its big-money rivals. While the Rays trail the league-leading Red Sox by 4.5 games, they have six more wins than the budget-busting NY Yankees. Tampa’s front office has historically maintained value orientation. Armed with a relatively modest $69 million payroll, the Rays have captured 9 more wins than Cresset’s Moneyball model would suggest. Tampa’s pitching is strong, and boasts the best-in-the-league 3.55 team ERA. Tyler Glasnow leads the pitching staff with a career-best 2.66 ERA. The Rays are currently ranked third at the plate in runs, behind the Astros and the Red Sox.
The Oakland A’s are the original Moneyball team and they continually make our honor roll. This year, the penurious A’s captured a .570 winning percentage with eight more wins than their $85 million payroll would suggest. First baseman Matt Olson is a top-tier hitter with an impressive .932 on-base plus slugging percentage and 21 home runs. Olson’s performance on offense has earned him a place on the American League’s All-Star Team. The Athletics are pursuing a new ballpark but are having trouble filling their existing field. The A’s opened at full capacity earlier last week, only to subsequently see the smallest crowds of the season – including the smallest crowd in Oakland in 24 years. As with their former hometown team mates the Raiders, this could portend a move to Vegas.
The Red Sox are a large-market team with a champagne budget. The Sox are spending $177 million this year, and sit atop the AL East with the league-leading winning percentage. The team has delivered seven more wins than Cresset’s Moneyball model suggests, giving them one of the top honors in the American League. Reliever Matt Barnes ranks second in the league with 19 saves. Barnes is having the best year of his career so far, posting a 2.68 ERA (over a full run better than his previous low) in 37.0 innings while striking out 62 — second best among closers in the AL. He will be representing the team at the All-Star game. The Red Sox also hold the second-best batting average in the league, behind the Jays.
Losers:
The Orioles are the worst-ranked American League team in Cresset’s Moneyball study. The team sports the worst winning percentage in the AL at .321. We estimate they’re about 12 wins behind what their $57 million payroll would suggest. Putting it another way, the Orioles spent $5 million more than the Cleveland Indians this year yet have 15 fewer wins as of this writing. Ugly. Baltimore’s starting pitchers have the worst team ERA in the league, 5.53. Adding injury to insult, their ace, John Means, has been sidelined with a strained left shoulder. The O’s might have to look outside their organization for needed help.
The Twins find themselves in the cellar of the AL Central division, 14.5 games behind the Chicago White Sox. While that’s not a big surprise based on their historical performance, what is surprising is the team’s $127 million payroll – a $6 million increase over their 2019 roster. That level of spending suggests a middle-of-the-pack performance, based on our model. The Twins have 122 homeruns this year, second behind Toronto. They hold a top-tier team batting average as well. Injuries have plagued the Twins this year. Ace pitcher Michael Pineda was sidelined with an elbow injury last month. Twins’ slugger Max Kepler has been struggling at the plate, hitting just .160 in 50 at-bats against lefties this season. The Twins have the pieces, but they need to be assembled. That’s team manager’s Rocco Baldelli’s job.
The Texas Rangers have historically done well in Cresset’s Moneyball ranking, but this year is an exception. The Rangers are stuck at the bottom of the AL West, 18.5 games behind the Astros. Our model suggests the team should be sitting at 39 wins, not 33. Perhaps it shouldn’t be a surprise, since Texas slashed its payroll this year by $31 million. The Rangers have a pitching problem: the team has only one starting pitcher with an ERA below 3.00, Kyle Gibson, whose arm and 6-0 record have been the heavy artillery of the Ranger’s pitching arsenal. Gibson will likely be traded. The team has blown 16 leads so far this year. Despite that, its offense is okay. The team is batting at a collective .233 average; defending World Series champs the Dodgers, by comparison, are batting at .240. The Rangers’ star hit-making outfielder duo of Joey Gallo and rookie Adolis Garcia have been shouldering the bulk of the team’s offensive work this season. As of June 28, they were responsible for 41 per cent of the Rangers’ home runs, 20 per cent of all hits and 31 per cent of all RBIs, with a collective batting average of .248. This team needs more depth, but, alas, the Rangers will probably be sellers later this month.
NATIONAL LEAGUE
The relationship between winning percentage and payrolls is positive in the NL also, suggesting that dollars drive wins. According to our calculations, National League teams should expect 1.1 additional wins for each additional million spent on talent. The NL payroll rose nearly $3 million between 2019 and 2021, with the biggest spending on the West Coast. The San Diego Padres, hardly a major-market team, splurged this year by boosting their payroll by $73 million, representing a 70-plus per cent jump in pay. Their .581 winning percentage reflects their investment. The LA Dodgers, a big-spending, large-market team, boosted their payroll by more than $50 million.
The relationship between expenditures on talent and success on the field is high in the National League this year. The big-budget LA Dodgers have 53 wins through June while Pittsburgh, with the smallest league payroll, sits at 30 wins. The outliers are lauded and derided below.
Winners:
The Milwaukee Brewers are perennial winners in Cresset’s Moneyball studies. The team’s 2021 performance is all about defense. The Brew Crew pitching staff sports among the lowest opposing batting averages of batters they face, at .213, and second only to the LA Dodgers. A lot of the credit goes to Freddy Peralta: in his fourth year with the Brewers, he has seven wins this season and at 0.90, has among the lowest WHIP (walks plus hits in innings pitched) stats in the league. The team’s defense is so strong they’re able to maintain a .600 winning percentage with a team batting average, .219, that flirts with the Mendoza Line. Shortstop Willy Adames has been a game-changer. Since joining the Brewers on May 22, Adames had helped Milwaukee to that impressive .600 record. Our model suggests the Brewer’s $93 million payroll would imply a .428 winning percentage at this point in the season. This team is clearly punching above its weight.
At .639, the Giants have the highest winning percentage in baseball. All that with a $153 million payroll. Like the Brewers, the Giants have a strong pitching staff. Overall, they’re tied for second with the Padres for earned runs, at a scant 3.29. Giants’ pitcher Kevin Gausman sports a 1.74 ERA and has eight wins through June. Add DeSclafani’s 10 wins, and clearly San Francisco has a strong one-two punch on the mound. The Giants have a league-leading 126 home runs and a .242 team batting average, making it an offensive threat as well. The Giants’ offense, unfortunately, has had to rely on the long ball, since the club recently endured a 0-for-25 stretch with runners in scoring position. The team’s offensive-defensive balance bodes well for the rest of the season.
San Diego ramped up their payroll this year and attracted team talent. With a .581 winning percentage, the Padres have delivered about six more wins than our regression model would suggest. The Padres picked up Yu Darvish from the Cubs this year and the pitcher is thriving, with seven wins and a 2.65 ERA. The Padres have turned to a six-man rotation and have pulled up pitchers from Triple-A to make starts. They’ve resorted to the bullpen in more than a dozen games. Offensively, shortstop Fernando Tatis Jr. leads the team with a .300 batting average and league-leading 27 home runs. The Padres are putting their substantial payroll increase to good use.
Losers:
The D-Backs are snakebit. Arizona has only 23 wins through the beginning of July, and the lowest winning percentage in all of baseball. While they don’t have a burgeoning payroll, their $53 million tab means the Diamondbacks are about 14 wins behind what our model suggests. Pitching is definitely not their strength: 26 pitchers have taken the mound for the team this year and only one has an ERA under 3.00. In fact, 14 out of 26 pitchers have an ERA over 5.00. Arizona’s ERA is 5.25, the worst in the National League. Offense isn’t much better. Making matter worse, the Diamondbacks suffered 23 consecutive road losses earlier this season, breaking records that were originally set back in 1943. Ouch.
The Phillies are a large-market team with small-market results. Their 39 wins are about 14 wins behind where their $183 million payroll suggests they should be about now. Bryce Harper, one of the reasons for the big payroll spending, is delivering a team-leading batting average at .282 with 15 home runs and 30 runs batted in. On the mound, Zach Wheeler has delivered at six wins with a 2.05 ERA so far this season. But defense in general is a big problem in Philadelphia. Rhys Hoskins is one of the worst-fielding first baseman in the league and Didi Gregorius is ineffective at shortstop. The team is unsurprisingly ranked 22nd in defensive efficiency.
The hapless Pittsburgh Pirates has the smallest payroll in the league and the worst winning percentage. Even still, at only 30 wins, the team trails our model prediction of 43 wins at this point of the season. Hitting is largely to blame. The team has the lowest number of runs in the NL. They also have the second-highest ERA in the league. Relief pitching is a bright spot and will likely come into play as the trade deadline nears. Chasen Shreve has been one of the most successful relievers in terms of run prevention for the Pirates this season, posting a 2.25 ERA that makes him a potential trade piece for the Pirates, who are clear sellers at the trade deadline.
About Cresset
Cresset is an independent, award-winning multi-family office and private investment firm with more than $60 billion in assets under management (as of 11/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.